Taxation without...

The problem with the discussion of what to tax and when not to tax and, lately, the sector and activity driven bout of taxation we’re having is that it does not address the central issues of taxation that every society has had to address since time immemorial. Nor does it address the verities that are available to even the most lowly educated individual as to what is the best way to tax. This recent discussion of taxing oil and gas companies more because the prices of oil and gas are up is a perfect example. The sector is oil and the consumption of oil and gas, and yet the taxation is directed to the productivity of those companies. Of course, removing the tax credits and exemptions that those companies may enjoy will result in a tax increase to them.
So what happens next? Do you expect that the oil companies will produce at the same level they did before? Do you know for a fact that the oil prices will be the same or higher in the future? No. In fact, the reality is that the last time a major windfall tax was brought in on oil companies, their profits collapsed and there was a recession in Texas, amongst other things, of a severity that most Texans still remember. Albertans also suffered a similar program, the NEP. None of these things resulted in more revenue for the government and in fact certainly resulted in less revenues than the government had before the provisions were brought in.
The real problem, as is evidenced by the stack-of-Bibles-sized income tax codes and statues that we have is that we are ignoring reality. Every society in history has had to decide what to tax more and what to tax less. There are really only two sane choices. Only productivity and earnings on one hand and consumption on the other bear examination for taxation.
Every economist, even the most left wing, has admitted that of the two activities, the one that should be taxed more is consumption. The one that should be valued more as an activity and taxed less is productivity. In detail, the country that taxes productivity more is usually less wealthy. The one that taxes productivity more is usually more wealthy.
Does this mean that most countries don’t have productivity taxes. No. Almost all of them do. But, all things being equal such as infrastructure, the rule of law and education and the like, the rate at which they have them almost certainly predicts growth, prosperity and economic advances they make. This is the economic no-brainer of all time.
By the same token, the country that taxes consumption more will likely consume less. The one that taxes it less will consume more. Unfortunately, the US provides the example on both sides. It has no VAT, so it consumes much more, but it has less taxes of productivity (such as income, corporate or capital gains) so it generally does produce more than most countries, except for some of the more marginal nations such as Hong Kong.
It has been pointed out that business and corporate rate in the US are the second highest in the Western world. It is a matter of simplicity and fairness and predictability. These basic principles are needed for a tax system.
The better answer if one system of taxation or another and not a hybrid of both. I believe that consumption should be taxed and this puts me at odds with my own government. It is the right way to go. I believe it will unleash productivity forces that we cannot even imagine in this country and make us an investment hub and create ever new higher levels of standard of living and wealth and prosperity for us that will make the post-War boom seem like a pop by comparison.
It is all about simplicity. The shame is that except for a few principalities, almost no major country has opted for one or the other. The closest we have are the flat taxes of the eastern European states which at least have the advantage of being simple in the taxation of productivity and have almost no real consumption tax. The result has been unparalleled prosperity. We should perhaps take a look at that. In my mind, though, this is simply a very high rate of taxation on consumption of any sort and no taxes on productivity.
Imagine the spin-off salutary benefit it would have in just the environmental sphere alone. It’s a green idea an its time has come.
In short, my grand bargain is a 25% VAT on any good and service in the country in return for no income, capital, investment or interest taxes. Based on the present GST rates, it would certainly be at least enough to gather $150 billion in revenues for the federal government. That leaves $60-70 billion to make up for spending levels that our government has now, but I believe that can be made up for by other forms of consumption tax such as carbon, gas or tariffs on more wealthy nations. It’s start, though.
Certainly, we would save money immediately on tax collectors.
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How fascinating it was to hear the Current finding no one who would do anything less than poo-poo the idea of the Ukraine and Georgia joining NATO. Let’s face it: the people who produce this show were cheering when Ed Broadbent wanted us to leave NATO in the 1980’s. No wonder they feel its relevance is tested. When Bill Clinton used NATO in Yugoslavia, I guess that was alright. Loathsome was the comment made by the Brookings Institute representative that 60% of Ukrainians were against joining NATO. Polls are for dogs, as Diefenbaker knew. We know that about half of the population of the Ukraine are of Russian extraction. Russia was just in the recent past an enemy of NATO. They might give a result such as this one on the question of joining NATO. It’s akin to saying that we should have a poll as to whether the president of Czeckoslovakia should have accepted the Munich deal if enough Sudetens stacked the ballot boxes to go along with Hitler’s deal.
How hard it was the Brookings man worked to prove to us all that certain western Europeans nations’ objections to these countries joining NATO have nothing to do with a cowardly fear of Putin in Russia cutting off their energy supplies. I’m sure they really just want to go slow. Thank goodness for those countries from the former Russian empire that are already part of NATO.
The discussion of people who oppose it always centres on one thing: the US is the moral equivalent of Russia. They never learn. They said the same thing during the Cold Ward. They fervently believe that the US having an alliance with Georgia, a country that was brutalized by Russia and just recently had a provocative attack by the Russian Air Force, is akin to the Russians establishing an alliance with Cuba.
If you accept that Russia and the US are morally equivalent, I suppose that all makes sense. But if you realize that NATO is a force for democracy and has been a force for freedom for most of Europe for the past 60 years and should be celebrated, and you realize that Russia is still at best a flawed democracy (at worse a thugocracy), you know that the Ukrainians and Georgians have a deep need to join NATO.
Yet, this was cheapened as somehow an inappropriate singular reason for wanting to join NATO. It’s like saying the Poles and Czecks who wanted a defence agreement with the UK in the 1930’s because of their fear of Germany was too singular a reason for wanting that alliance. What a stupid way of thinking.
The only people who will be celebrating if Russia gets its way and manages to make NATO deny these countries their membership will be the Russians and their friends in those countries who continue to try to undermine the fragile democracies those countries have developed. Russia has nothing to fear from the likes of Georgia and the Ukraine, or the Baltic republics, being unified and allied with the Security Alliance against incursion and invasion. Those countries have everything to fear from being separate and easily picked off by the Russian bear in the area.
The chief aggressor in this region is Russia. Russians have nothing to fear from these countries if they trade with them peacefully and interact with them peacefully like every other civilized nation. Maybe one day, Russia will be a member of NATO.
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Interesting statistic from Fox Talk: in a certain period of time, the oil companies have one-half trillion dollars in profits. The government made $1.3 trillion.
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There are only two things that politicians are worried about: where the money is coming from and where they can send it.